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[h=1]TRAIN DISRUPTIONS: TIME FOR NOVEL PUNISHMENTS[/h]
Post date:
5 Mar 2015 - 3:40pm
THE recent spate of MRT disruptions is unacceptable ("Steps taken to fix series of train disruptions: SMRT"; yesterday). However, the problems have only become increasingly frequent, despite harsher penalties.
Clearly, monetary penalties are insufficient to "incentivise" the operator's owners and managers to perform the necessary works.
At least two of the disruptions last month were due to equipment failure.
This may be because the fines only indirectly affect the company's bottom line. A fine only "incentivises" certain actions, but cannot "compel" the company to take certain actions.
For example, although SMRT makes losses on its fare operations, it makes most of its profit from non-fare operations - such as advertising and rent - which are only tangentially related to maintaining its assets and far exceed the fines that the Government imposes.
Therefore, we need novel forms of punishment. The penalties for the company should be made in terms of voting rights and/or stock options instead of lump-sum fines. Voting rights and/or stock options will accrue to the public transport regulator. The threat of the public transport regulator exercising its rights should be sufficient to compel the board of directors to act more defensively and to maintain their infrastructure adequately.
The above measures directly affect the value of shares held by the owners without reducing the amount of money SMRT has for operations. Thus, members of the public need not be afraid that the fines will be "passed on" to consumers.
Moreover, the firm's owners can be held directly accountable for failing to run a public service that is up to standard.
Greater voting rights will also give the regulator a direct say in how the transport operators conduct their maintenance procedures, without having to go through the indirect method of imposing fines.
Sum Siew Kee
*Letter first appeared on ST Forums (5 March)
Post date:
5 Mar 2015 - 3:40pm
THE recent spate of MRT disruptions is unacceptable ("Steps taken to fix series of train disruptions: SMRT"; yesterday). However, the problems have only become increasingly frequent, despite harsher penalties.
Clearly, monetary penalties are insufficient to "incentivise" the operator's owners and managers to perform the necessary works.
At least two of the disruptions last month were due to equipment failure.
This may be because the fines only indirectly affect the company's bottom line. A fine only "incentivises" certain actions, but cannot "compel" the company to take certain actions.
For example, although SMRT makes losses on its fare operations, it makes most of its profit from non-fare operations - such as advertising and rent - which are only tangentially related to maintaining its assets and far exceed the fines that the Government imposes.
Therefore, we need novel forms of punishment. The penalties for the company should be made in terms of voting rights and/or stock options instead of lump-sum fines. Voting rights and/or stock options will accrue to the public transport regulator. The threat of the public transport regulator exercising its rights should be sufficient to compel the board of directors to act more defensively and to maintain their infrastructure adequately.
The above measures directly affect the value of shares held by the owners without reducing the amount of money SMRT has for operations. Thus, members of the public need not be afraid that the fines will be "passed on" to consumers.
Moreover, the firm's owners can be held directly accountable for failing to run a public service that is up to standard.
Greater voting rights will also give the regulator a direct say in how the transport operators conduct their maintenance procedures, without having to go through the indirect method of imposing fines.
Sum Siew Kee
*Letter first appeared on ST Forums (5 March)
